Category Archives: Free Courses

Better than a MBA/CFA–A PhD in Financial History by James Grant

A Fantastic Offer

From: CSInvesting: I have no affiliation with Grants Publication whatsoever, but I am a fan of his work.   I post this because if you want access to an incredible library of the past 35 years of financial history, then this is your chance.  If you pay $349, ignoring the book and the six future issues, you have access to two issues per month from the past 35 years or about 840 issues at 42 cents per issue.   Besides financial data, there are excellent case studies of valuation and financial euphoria/despair.

If you read through those issues (Of course, skimming over articles that don’t interest you.), then you would have the equivalent of an MBA/CFA/PhD in financial history plus a vast course in valuation on certain companies, bonds, and real estate in real-time over more than a third of a century.   THIS IS A DEAL!    See the offer below

Grant’s versus…
Dear Almost Daily Grant’s reader,

The new edition of Grant’s Interest Rate Observer features a hard look at a zooming stock. The company behind the stock is widely appraised as one of the century’s greatest. Grant’s begs to disagree with that consensus view, as is our wont. Who or what might bring this shooting star down to earth?

Subscribers are also reading about. . .

–the newly crowned holder of the dubious title of America’s most indebted nonfinancial corporation. Would you buy these bonds? Your insurance company probably is.

–one of the few North American industries where value–and bearishness–abounds.

–a pair of struggling foreign debt collectors who may soon be getting a taste of their own bitter corporate medicine.

–a certain Asian behemoth which has managed to spawn a money supply nearly as large as that of America and the eurozone combined.

All this, plus an inspiring Fourth of July quotation by Thomas Jefferson, awaits you.

Sign up today for a trial subscription: six issues, access to the 35-year Grant’s archive and a signed copy of Jim Grant’s latest book, “The Forgotten Depression: 1921, The Crash That Cured Itself,” winner of the 2015 Hayek Prize, all for just $349 ($359 outside U.S. and Canada).

Click Here to begin a six-issue Trial Subscription to GRANT’S. This offer ends MONDAY, July 2, 2018.

– Philip Grant

Cliché Battle

 

Buffett at his Best

Joel Greenblatt on Valuing Stocks; Is College Worth It?

The Value of College Goldman report (Click)

Alternatives to College

Joel Greenblatt on Valuing Stocks

Tilson/Tongue Hedge Fund Boot Camp

FREE CLASS in New York City

Whitney Tilson through www.kaselearning.com will be teaching value investing and hedge fund entrepreneurship to the next generation of investors. His programs are aimed at experienced investors and are very hands-on, so they aren’t cheap ($1,500-$2,000/day), but for beginners, he is offering a free two-hour seminar, An Introduction to Value Investing, in midtown NYC (57th and 7th) on Wed., April 4th from 5:30-7:30pm, followed by a cocktail hour. If you’d like to come, just email wtilson@kaselearning.com  and Whitney will send you details.

Investing and Hedge Fund/Entrepreneurship “Boot Camp” And other Courses.

I attended Whitney Tilson’s and Glenn Tongue’s February 6th – 8th Boot Camp.  I was initially skeptical but pleasantly surprised.

Overall, I was impressed with the learning materials, the organization, and most importantly, the participants who attended.  Whitney and Glenn were brutally honest and forthright in showing the rise and fall of their business.  One can know the lessons of Munger, Buffett, Graham, and behavioral finance but still fall into a pit.  Our main enemy is likely to be ourselves. There were many lessons taught, but my promise of confidentiality prevents me from giving details.   The course would not be appropriate for a rank beginner, but for an entrepreneur who wishes to launch their own fund.

The main value–besides the lessons taught–would be to cultivate relationships with the participants including Whitney and Glenn.   I wouldn’t go to Whitney to help you get a job, but if you do a rigorous analysis of a company, I am sure Whitney or Glenn could give you honest feedback.  And if they liked your work, they might suggest how you could reach a larger audience.  Also, your classmates could help.  The opportunity to build strong relationships with knowledgeable investors and hedge fund managers would be invaluable for someone beginning their fund.

Each day was ten hours long with meals and cocktails afterwards, so you had plenty of opportunity to develop relationships.

60% of the course was how to improve as an investor, 20% life lessons, and 20% how to build your hedge fund.

See details here:

Upcoming dates are April 29th to May 1st
and June 12th through 14th.

There are other courses available as well.

See http://www.kaselearning.com/

Make sure you receive at least a 10% discount on the course or other courses by usingCSI10 when you register.

If you want details on my experience of the course and what you might expect, please don’t hesitate to email me at aldridge56@aol.com with BOOT CAMP in the subject line.   I will be happy to discuss with you.

Here are my notes of the comments from the other attendees:

“Regarding last week, I was super impressed by the material.  I liked the practical nature of the lessons they taught – a lot of courses exist that cover investing philosophy, but this was unique in its applicability to a start-up manager like myself.”

“The main lesson I learned from the course was to keep it simple.  Look for the easy investments.”

“I actually really liked the emphasis on short selling, because it tends to be one of the great struggles of hedge funds that need to be long & short to justify the carry but have difficulty executing on compelling short ideas in the midst of a bull market.”

“I would have liked more on portfolio construction because that is what I am struggling with. Ditto for risk management and small funds. Things I loved – the interaction of our group, the LL case, the mea culpas of what Whitney and Glenn did right and wrong.”

All the participants told me that they both enjoyed the boot camp and found it useful in developing their fund.

 
Future Boot Camps

Whitney solicited feedback each day, therefore, Whitney and Glenn should improve their course offerings.

I give a thumbs-up.  To learn more about the boot camp/Kase Learning programs you can go to www.kaselearning.com.

Also, view a video

Update:

I will periodically update information on Kase Capital for interested readers.  If you learn anything from reading this post it should be to KNOW THYSELF!   The market is an expensive place to find out.  John Chew

The hedge fund founder explains why his fund was “sucking the joy” out of his life — and why he’s turning its failure into a teachable moment.

By Michelle Celarier
March 20, 2018

https://www.institutionalinvestor.com/article/b17f19gwp3595r/the-last-days-of-whitney-tilson’s-kase-capital

Whitney Tilson’s Facebook friends surely thought he was on top of the world last summer.Photo after photo posted on the social media site tells the story of a rich, exciting life: There’s Tilson watching whales off the coast of Iceland. Next, he’s on the canals of Amsterdam with his wife and daughter. Just a few days later, he’s checking out Lenin’s tomb in Moscow. Last August he even climbed to the top of the famed Eiger mountain in the Swiss Bernese Alps, photographing every step of the arduous journey.

But to hear Tilson talk today, the reality was grim. After 18 years in the hedge fund business, his firm — Kase Capital Management — was losing money, and Tilson found himself dipping into hissavings to keep it afloat.

“I had lost my passion for the game,” Tilson confided in a two-hour, soul-searching interview about the events that led him to shut down his hedge fund last September. After gaining 184 percent, net — when the broader market was up only 3 percent — during the first 11 and a half years of his hedge fund’s existence, Tilson’s returns had been floundering. Since 2010, Tilson says, he trailed the Standard & Poor’s 500 stock index, and in 2017 he had lost almost 9 percent on the year by the time he shut down his fund. “In an ironic twist, I always built my firm to survive the worst storm, but it was a nine ­year bull market — complacency and sunshine — that took me out.”

Tilson is one of several veteran hedge fund managers, including Eton Park Capital Management’s Eric Mindich, Hutchin Hill Capital’s Neil Chriss, Eclectica Asset Management’s Hugh Hendry, and Blue Ridge Capital’s John Griffin, who called it quits in 2017. Small hedge funds come and go with great regularity, but the inability of the industry’s stars to profit as the stock market soared to new heights has raised questions about the viability of the model. Tilson was a much smaller player than the others — at his peak he managed only $200 million — but his experiences are a window into the headwinds that have faced these former masters of the universe.

What distinguishes Tilson from many of his peers is his willingness to talk about the long, excruciating road down. “It’s hard, after seven years at sucking at something, to wake up and tap-dance to work. So, I found myself getting distracted. I wasn’t physically getting out of shape; it was the opposite. I was going and climbing mountains. This one part of my life, I was miserable at; I was having no success. It’s hard to have the self-discipline to focus all your attention like a laser, and all your spare time on a particular part of your life in which you’re getting so much negative reinforcement.”

Last year, as his fund’s losses began to mount, Tilson says, “I didn’t feel like I could look my investors in the eye and say, “˜Look, I’m losing you money, but I’m not doing anything else, 18 hours a day that I’m awake, the only thing I am doing is trying to turn performance around.’ ” The vacation photos notwithstanding, Tilson says he even felt guilty attending his daughter’s soccer games. “My hedge fund was sucking all the joy out of my life.”

Tilson’s introspection is uncommon for those in the hedge fund business, where self­confidence and salesmanship are as important to success as any investing prowess. As Tilson readily admits, managers cannot afford to be frank while they are going through turmoil, lest they further hurt their business — and their investors. “The last thing you want to do is air your dirty laundry. That will further shake the confidence of your investors.”

But there’s another reason for Tilson’s uncommon openness: His experiences, both positive and negative, have led him to create a whole new business, turning Kase Capital into Kase Learning (Kase stands for the first letters of the names of Tilson’s wife and three daughters). From a small conference room at the New York Athletic Club, Tilson has started teaching the perils and profits of investing in general — and running a hedge fund specifically — to aspiring youngsters who don’t come out of big seeding platforms like Julian Robertson’s Tiger Management or a multibillion-dollar hedge fund.

“Unless you are the lucky 1 percent who has the chance of learning in an apprenticeship, how are you supposed to learn how to do this?” Tilson says. “Nobody teaches the next generation. There is not one business school on the planet that teaches anything really usable to starting up your own hedge fund.

“It’s so rare to talk to a manager who is injected with truth serum, isn’t it?” he asks as he details his long bumpy journey through hedge fund land. “But I don’t give a crap anymore.”

CFA Seminar on Financial History; Bubble Studies; Advanced Study in Human Action

Seminar of Financial History

In an age when an algorithm is the main competitor for many fund managers, what can we know that they don’t? Algos understand the data trail of history, but this trail provides only limited insight into the key lessons of financial history for investors. In this talk, first provided at the 62nd Annual CFA Institute Financial Analysts Seminar, Russell Napier discusses those 21 most important lessons from financial history that allow human beings to profit at the expense of the machines.    1 Hour on-line seminar Feb. 1, 2018. Register (CSInvesting.org: I believe it is free: https://www.cfainstitute.org/learning/events/Pages/02012018_138012.aspx

Regardless of whether you can attend, read relentlessly about financial, economic, and common history.   Note what Jim Grant of Grant’s Interest Rate Observer says:

But our main goal is to tell you the next important event in the markets. And sometimes we succeed.

– As with the tech bubble in 1999
– The 2008 mortgage crash
– The 2009 recovery in financials
– And the 2012-13 rise in house prices

How have we been so prescient over the years?
We don’t have fancy, financial computer models or a team of MBAs and Ph.D.’s to help us make these predictions. And we don’t have access to any kind of special information.

But we have been immersed in the markets for over 30 years. And we’ve studied the financial history of the past 200 years. None of which guarantees clairvoyance—nothing does. What we do claim is the capacity to see the present in the context of the helpful lessons of the past.

Like when we warned about the mortgage debt bubble in September 2006.

From the Sept. 8, 2006 Grant’s:
“Overvalued,” we, in fact, judge trillions of dollars of asset-backed securities and collateralized debt obligations to be, and we are bearish on them. Housing-related stocks may or may not be prospectively cheap; they at least look historically cheap. But housing-related debt is cheap by no standard of value. For institutional investors equipped to deal in credit default swaps, there’s an opportunity to lay down a low-cost bearish bet.

Bubble Studies

368353935-GMOMeltUp   J. Grantham says that the current market does not YET show the characteristics of a bubble despite being highly valued.

Referenced study in the article: Bubbles for Fama 2017 and gmo-quarterly-letter

and more of interest: faang-schmaang-don-t-blame-the-over-valuation-of-the-s-p-solely-on-information-technology

the-s-p-500-just-say-no

Update (1/10/2018) Runaway Train – Dec 2018

Advanced Seminar in Human Action

12/06/2017  Mises Institute
Arguably one of the greatest thinkers of the twentieth century, Ludwig von Mises created a framework for all of economic science beginning with the simple axiom that individuals act. In his magnum opus, Human Action, he described economics as a branch of the theory of human action and stressed how broadly it spans, far beyond a discussion of mere money and prices. Mises said, “Economics must not be relegated to classrooms and statistical offices and must not be left to esoteric circles. It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilization and of man’s human existence.” For Mises, it was imperative that everyone learns economics, calling it “the main and proper study of every citizen.”

Human Action is a challenging read. With over 800 pages of dense material, study tools are very helpful. The course, Advanced Seminar in Human Action, is a useful addition to other materials like the Human Action Study Guide.
In this course, leading Austrian economists walk the student through Human Action a chapter at a time.

If you’ve ever wanted a push to help you get through the book or if you’ve wondered about your own reading of the material, here is your opportunity to study Human Action with David Gordon, Joe Salerno, Jeffery Herbener, Peter Klein, Guido Hülsmann, and Mark Thornton.

Human Action by Ludwig von Mises is available for free on Mises.org and for purchase as a paperback and hardcover in the Mises Bookstore.

Register: https://mises.org/library/advanced-seminar-human-action

The teachers are excellent and Human Action is the Magnum Opus of Ludwig von Mises.  The book is a DIFFICULT read but there is a study guide, lecture videos, and lecture slides for all the chapters of the book.  You will have a strong grounding in economics and improve your reading and critical thinking skills, but if you are a beginner, I would opt for  https://www.mises.org/library/economics-one-lesson

Pitch the Perfect Investment

I have not seen the videos in the link below.  Let me know if you learn anything practical.

Pitch the perfect investment (videos)

Home

Listen to the interview: https://soundcloud.com/valuewalk/pitch-the-perfect-investment-with-paul-sonkin-and-paul-johnson

Other than seeing the videos and listening to the interview, I have yet to read the book.  The book may help an analyst learn how to form their ideas into a concise report.   Remember than many money managers have nano attention spans, so you must get your idea across quickly in a compelling way.

That said, one area that might not have been covered is how to KNOW THYSELF!    What approach fits your interests, skills and talents and how do you accomplish the goal of knowing your circle of competence?   Then how do you learn from mistakes?  How do you track your learning and results?   Because of randomness, learning from past investments is more difficult than it appears.  Spend as much time studying yourself as the company you are pitching!

The above is not a knock on the book; I believe self-knowledge is an underemphasized skill of the investment game.

UPDATE: 9/27/2017 http://pitchtheperfectinvestment.com/2017/09/27/92617-video-from-book-launch-event-at-fordham/     A more recent set of videos explaining the motivation for the book.

When is a P/E not a PE: Case Study in Indexing

A tutorial on the dangers of Indexing investing. 

Know what you are doing IF you buy index funds!  You can learn a lot by studying Horizon Kinetics.  The video provides a valuation of the index and how to think about investing or not in indexes.

http://horizonkinetics.com/market-commentary/2nd-quarter-2017-commentary/

Also, more on indexing here:

Q2-2017-Commentary_APPROVED_FINAL

Q1-2017-Commentary_FINAL-1

Q4-2016-Commentary_Final

Q3-2016-KAM-Conference-Call

Work on the YOU: Free Course on Stoic Training

Article announcing Stoic Mindfulness and Resilience Training (SMRT) 2017 with details of live webinar sessions, etc.

 

Enrolment is now open for the Stoic Mindfulness and Resilience Training (SMRT) 2017 online course.  This is a free eLearning course, which Donald Robertson has been running once or twice each year for Modern Stoicism since 2014.  You can access the preliminary area now and the four weeks of the course will officially begin on Sunday 16th July, when enrolment will close.  This year over 500 people enrolled within the first 48 hours after it was announced on social media.  Around 650 people are now enrolled and we anticipate that will have increased to nearly 1,000 by the course start date.

Sign up here: http://learn.donaldrobertson.name/p/stoic-mindfulness-resilience-training-smrt/

In the first year, over 500 people took part in SMRT and data was collected from participants, using the Stoic Attitudes and Behaviours Scale (SABS) and a battery of validated outcome measures of the kind used in research on CBT and positive psychology.  You can download a PDF of our report here showing the findings in detail: SMRT_Report_2014

The writings of Seneca! http://tim.blog/2017/07/06/tao-of-seneca/

CSInvesting: Though this philosophy takes active practice, you might find developing the ability to control your thoughts and reactions to what you encounter in daily life helpful–especially in dealing with Mr. Market. Below is a schema of Stoicism (Click on diagram, then enlarge through your browser to read text).


Learning from Grants:http://grantpub.libsyn.com/episode-1-grants-interest-rate-observer

Why “smart” people do dumb things.   Rational thought. https://www.scientificamerican.com/article/rational-and-irrational-thought-the-thinking-that-iq-tests-miss/

Edison Schools CS on Econ. of Scale, Part II

http://csinvesting.org/2017/04/13/hedge-fund-quiz-economies-of-scale/ for the last post on this case study.  Note excellent comments by readers.

Readers provide excellent analysis

The twenty-minute time limit was to force you to concentrate on the key issue: Does this company have economies of scale?   Because of it doesn’t, then growth will NOT help profitability.  In fact, growth with losses financed by debt can be financially lethal.

Part of improving as an investor is avoiding the disasters as this company turned out to be. Bad Management_Has Avenues Mastermind Chris Whittle Learned His Lesson and Failure in For Profit Education are two articles that chronicle the investor and management failures in the For-Profit-Education Sector.

The goal of this case study is to practice:

Our 10-K reading skills and our analysis of competitive advantage.   Despite how CRITICAL it is for an investor/management to determine and distinguish competitive advantages, structural advantages are often confused with outcomes or efficiency.

Competitive advantage

Competitive advantage refers to something specific–a structural barrier that prevents competitors from simply replicating the results of a successful business.  It should not be surprising that the terms competitive advantage and barriers to entry are interchangeable.

Without barriers to entry, a business cannot long enjoy an advantage over competitors that will quickly do the obvious—enter. This process of new entry will hurt not only relative performance but also absolute performance, as competition for customers dampens revenues, and competition for resources raised costs.

FIRST MOVER ADVANTAGE

First, it is NOT a competitive advantage.   But here is an example of having a first mover advantage.   You and I are in a duel.  We walk ten paces away from each other then turn and shoot the other.  After three paces, you turn around and shoot me in the back–now THAT is a first mover advantage.

Scale not size matters

It is industry structure determines which categories are most likely to manifest themselves and in what form.

Size doesn’t matter, but scale does. Scale is a relative concept, not an absolute one. The benefit it bestows are relative to peers within the relevant competitive set.

Look at WD 40_VL the company has a competitive advantage in PRODUCT SPACE.   WD-40 is the ubiquitous oil/lubricant that people keep in their tool-box/shelf/or under the sink.  They own 90% of the lubricant market.   However, they also di-worsify their free cash flow into hand soap and motor-cycle products.   Now the stock is over-priced in my opinion. If management could sell off its non-competitive products, and then become a tontine (use free-cash flow to buy in all shares)–investors would flourish.

Having 2% of a 10 billion dollar market or $100 million in sales is probably not as profitable as having sales of 40% of a 200 million dollar market or $80 million in sales.

Scale matters most when fixed costs matter most relative to the business’s overall cost structure. With large fixed costs, the operator serving the most customers will have a significant advantage due to its ability to spread those costs over more unit sales. If the costs of a business were entirely variable and increased proportionally as it grew, there would no advantage to scale.   The extent of the advantage is determined by how relatively important fixed costs are how relatively large the business is compared to the next competitor. Second, much of what is thought of as traditional fixed costs in school management—admin, school relations and lobbying, and even curriculum development—has a significant variable component.

Curriculum requires local customization. The two primary sources of fixed-cost scale in education generally are content development on the one hand and sales and marketing on the other.

Reading the 10-K

We jump to page 27: Selected financial data and see rising sales financed by issuing shares and debt.  Yet costs are not declining as a percentage of sales.  Ebitda is declining per student.  1999 revenues of $133 million almost triple to $376 million in 2001 yet operating cash flows decline from negative $17.6 to negative $29.3.

Remember the little red school house?   Edison Schools has to provide services in a regional area.   If they can develop density (or clustering as management mentions on page 16 under competitive strengths) in particular regions, then perhaps this company needs more time to show progress?  To determine their success in implementing a “clustering strategy, the next pages to peruse are pages 13-15 where you can see where Edison is operating schools.  Take a large state like Colorado. Edison has two schools in Denver and three in Colorado Springs.   Washington, DC, a huge metro area, only has eight schools and on and on.   Management will not be able to leverage their admin, curriculum and development cost over such a widely dispersed area.

Imagine running a carting/garbage pick-up service where you have 5 customers in Eastern Connecticut, seven in New Jersey, 4 in Texas, you would go broke just driving to the different customers. You would lack customer density in your routes, so your costs would be too high.

PASS!   Then if the analyst had more time, he/she could look at management.  He or she would uncover the ugly history of Chris Whittle.   No mention of that in the Credit Suisse analyst 50-page report.

Studying competitive advantages like economies of scale, customer captivity, network effects, low-cost producer will pay-off.   Practice reading case studies of success and failure will help you hone your skills.

Note companies in the educational sector with advantages: Bright Horizons_VL and Grand Canyon LOPE

One of the best books I have found on studying competitive analysis is

Strategic_Logic (Strategic Logic link will be down in 36 hours, so join the Deep-Value Group by following the links http://csinvesting.org/2015/01/14/deep-value-group-at-google/ and ask for a copy.

https://www.youtube.com/watch?v=zsvnvV3wDgc Greenwald of Columbia Business School discusses local advantages.

The trilogy of books, Competitive Demystified, The Curse of the Mogul, and Class Clowns will also provide more depth to your studies:


 

 

 

An Example of the Analyst Course

It is 2006, and you want to know the true sustainable free cash flow of Mohawk because you love sleepy, mundane industries that are slowly growing. Why? Because people love to buy lottery tickets and glamour so you “go where they ain’t.”

So what is the difference between Mohawk’s GAAP earnings per share and your estimate of FREE CASH FLOW per share?    Use cash flow from operations and maintenance capex (which you need to roughly estimate). Be roughly right, not precisely wrong.

Can you explain the difference?   What is going on with Mohawk and the industry?   Note the ten-bagger or 25% CAGR for almost ten years (move over Buffett) from the 2009 lows.  Surprising or not?    MHK-2006 AR FCF Analysis.   Can you use this as a way to find other ten-baggers?

Of course, the above question is not hard for you since you have already read this 412 page book several times: Wiley Creative Cash Flow Reporting.  You do not have needed to read that book to answer the question. Use common sense and a small bit of accounting knowledge like (amortization of goodwill-hint!)

This an example of how the analyst course would teach. You have to do many case studies to practice learning concepts like free cash flow.  Like flying and sex, you have to practice.

Update: April 11, 2017: The price you pay

If you pay too much even for a great business, then you will have poor returns.

Take the three Value-Lines of Coke (KO).   VL KO and note the $80 + plus price, then track its free cash flow (as calculated by Value-Line which is After-tax earnings plus depreciation + amortization then minus capital expenditures), then earnings.   Track the price and those metrics: KO_VL_Jan 2013 and Ko_VL 2017.   You will see that on average cash flows and earnings and dividends rise from 1998 until 2017, yet returns have been just OK.   Paying too high a price hurts your total returns even with a strong, stable business like Coke. Investors were extremely optimistic over Coke’s growth prospects.  If you held Coke for a long time, your return would equal the company’s long-term return on equity.

Also, Buffett’s non-controlled public investments have generally lagged the S&P 500 Berkshire Hathaway AR 2016.

Good luck.    Those who do not provide the correct answer will have to spend time with my ex-wife: